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Thursday, 8 April 2010

Risk of asset price inflation

By Gabriel Chen

ASSET price inflation could become a key problem for emerging economies buoyed by capital infusions from developed countries, warned a top banker at a seminar in Singapore on Thursday.

Hong Kong-based Jaspal Bindra, chief executive for Standard Chartered Bank's Asian operations, told the Singapore Indian Chamber of Commerce and Industry that the perceived risk of asset inflation was likely to grow as a consequence of inflows of foreign direct investment.

And money pouring into developing countries could raise concerns about their currency policies, particularly those that are pegged to the US dollar.

Mr Bindra said the challenge for emerging economies was whether they can absorb capital, such as foreign direct investments.

'The lack of depth and breadth of capital markets means such flows find a home in equity or real estate, adding to asset price inflation,' he said.

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